Instructor: Joel Wittman ph. 212.677.5073 mobile. 201.803.6999

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NYUWagner

The Business of Health Care - HPAM-GP.2848-001

September 10th – December 10 th /17th, 2012

Instructor: Joel Wittman ph. 212.677.5073 mobile. 201.803.6999 fax. 917.421.9935 joel.wittman@verizon.net

Course Description and Objectives

Should health care be viewed as a business model and managed as such or is it considered to be a social obligation that is to be made available to society? This question has still not been answered satisfactorily. Accounting for more than

18% of this country’s Gross Domestic Product, the medical care industry certainly requires effective and financially prudent management to achieve its purpose.

Greater numbers of health care organizations are adopting business principles in order to compete in the current marketplace.

This course will explore the idea if health care can be managed in a competitive and market based environment, the current issues affecting the health care industry, what approaches not-for-profit health care organizations can take to remain viable, and the phenomenon of the mergers and acquisition process and its underlying determinants in the health care sector.

The course will be divided into three topic segments:

September 10th– October 1st: Overview of the health care industry, financing, market position, effect on consumers of health care services, provider accountability and remuneration, and current issues on health care reform.

October 8th – October 29th: The evolution of not-for-profit organizations into social ventures and social entrepreneurship including mergers and acquisitions in the not-for-profit sector.

November 5th – December 3rd: The mergers and acquisition process in the health care field including reasons, valuation principles, determinants and maximizing of value, negotiating, the effect of the economy on the

M&A process, and issues occurring post-transaction.

December 10 th /17th – Presentation of group papers.

A primary objective of this course is to provide the student and next generation of managers with a practical and working knowledge of the health care industry.

Joel Wittman 1

NYUWagner – The Business of Health Care – HPAM-GP.2848-001

Fall 2012

Course Requirements

Three written assignments are required; papers should be five pages or longer:

1.

The Supreme Court decision upheld the constitutionality of the Patient Protection and Affordable Care Act but did relieve the states of certain financial penalties if a state does not comply with the expansion planned for Medicaid. In your opinion, what will be the effect on the health care industry based on the decision, how will the business of health care change, and what changes should the industry make to accommodate the PPACA?

This assignment will be due October 8 th .

2.

You are the CEO of a not-for-profit incorporated health care services organization. Recessionary times and reductions in reimbursement have negatively affected your organization’s ability to meet its mission and planned objectives. What changes to the business model would you propose to ensure the continued viability of entity? Think like a social entrepreneur.

Suggestions:

 identify a health care organization and analyze its business and operating model

 research the company’s marketplace and customer/patient base

 identify causes of operating and financial distress: i.e., changes in reimbursement methodology and mix; decreases in non-earned revenues; shift in customer/patient base; increase in competition; regulatory changes

 develop a plan of what you would propose including type of program/organization, revenue and financial enhancement opportunities, and hopeful results.

This assignment will be due November 5th.

3.

Select a health care provider (public or private; I suggest publicly traded since the information is more readily available) and analyze its operating and financial positions. Create a Confidential Information Memorandum (CIM) on the company including its strengths, weaknesses, opportunities, and threats. Develop a valuation for the company. This will be a group project. Each group will review its CIM with the class. You will receive copies of a questionnaire that can be the basis for the analysis, a completed CIM, and a valuation spreadsheet.

This assignment will be due December 10th.

Joel Wittman 2

NYUWagner – The Business of Health Care – HPAM-GP.2848-001

Fall 2012

Reading and Other Materials:

Reading and other materials will be posted on Blackboard. You will also be provided with examples of documents and memoranda used in the M&A process

(including a sample of a CIM). The reading assignments are indicated in the body of the syllabus.

Grading;

Your grade will be determined by the quality of your written assignments and presentations, your participation in class discussions, my perception of your insight and analytical thought processes about the course topics, and your attendance.

Now, take a deep breath, relax, and enjoy the learning experience. A detailed syllabus follows.

Joel Wittman 3

NYUWagner – The Business of Health Care – HPAM-GP.2848-001

Fall 2012

NYU Wagner

Syllabus - The Business of Health Care – HPAM-GP.2848

Fall 2012 Semester

Week 1 - September 10th

Review of course requirements

Overview of the Health Services Industry: Services, Revenues, Operating

Environment

Readings

 The Access Project: “A Community Leader’s Guide to Hospital Finance”

Chapters I, II, VI.

Current U.S. Health Care System; a Braff Group presentation

No class scheduled for September 17th

Week 2 - September 24th

Health Care Financing

Readings

Health Care USA: Understanding Its Organization and Delivery, 6 th

Edition;

Chapter 7; Sultz and Young; Jones and Bartlett Publishers

Week 3 – October 1st

Is Health Care a Market Good?

What does economics tell us about how markets work in a competitive system? What are the requirements for a market to work? What are the indications that a market does not work?

Readings

Uncertainty and the Welfare Economics of Medical Care; Kenneth Arrow;

American Economic Review 53(#5) December 1963

Is Health Care a Market Good?: pro

What are the arguments of those who believe that health care is a market good and works well on a market basis?

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NYUWagner – The Business of Health Care – HPAM-GP.2848-001

Fall 2012

Readings

Redefining Competition in Health Care; Michael E. Porter and Elizabeth O.

Teisberg; Harvard Business Review; June 2004

Is Health Care a Market Good?: con

What are the arguments of those who believe that health care is not market good and should not be delivered on a market-driven basis?

Readings

Can Markets Give Us the Health Care System We Want?; Tom Rice; Journal of

Health Politics, Policy and Law; April 1997.

Going for the Gold: The Redistributive Agenda Behind Market-Based Health

Care Reform; Robert G. Evans; Journal of Health Politics, Policy and Law; April

1997

Week 4 – October 8th

Consumer Driven Health Care

Pay for Performance

Health Care Reform – The Hieroglyphics of Health Care – PPACA; ACO;

PCMH; MLTC, etc.

Readings

Consumer Driven Health Care – Promise and Performance

James C. Robinson and Paul B.Ginsburg. Health Affairs , March/April 2009, 28(2)

Managed Consumerism in Health Care; James C. Robinson, Health Affairs ,

Nov/Dec 2005, 24(6)

Pay for Performance Incentive Programs in Healthcare: Market Dynamics and

Business Process; Geoffrey Baker; Research Report

Pay for Performance; a Braff Group publication

Should Health Care Come With a Warranty?; Francois de Brantes, Guy

D’Andrea, and Meredith B. Rosenthal; Journal of Health Affairs

 My Father’s Broken Heart; Katy Butler; New York Times Magazine; June 20,

2010

Focus on Health Reform; Henry J. Kaiser Family Foundation

 What’s in the Bill?; WSJ.com; March 22, 2010

Toward a 21 st_

Century Health Care System: Recommendations for Health Care

Reform; Kenneth Arrow, et al; Annals of Internal Medicine; April 7, 2009;

Volume 150 Number 7

Accountable Care Organizations: Summary and Analysis of the Proposed Rule;

MedeAnalytics White Paper

Fierce Healthcare – October 21, 2011 issue

Medical Homes: Awareness and Early successes; Health Intelligence Network

(HIN.com) White Paper

Multiple Paths to Integrated Health Care; HFMA Publication – 2009 Archives

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NYUWagner – The Business of Health Care – HPAM-GP.2848-001

Fall 2012

No class scheduled for October 15

th

Week 5 – October 22nd

Are not-for-profit organizations adopting for-profit principles?

Readings

Evolving from a Not-for-Profit to a Social Venture; a Braff Group publication

Genius at Work, an interview with Bill Strickland, CEO of Manchester

Craftsmen’s Guild and the Bidwell Training Center; Source: Management

Assistance Program for Nonprofits

First written assignment due.

Week 6 – October 29th

Social Entrepreneurship

Readings

The Meaning of Social Entrepreneurship; J. Gregory Dees, Professor of Public

Service, Graduate School of Business, Stanford University

Eight Basic Principles for Nonprofit Entrepreneurs; Jerr Boschee; Nonprofit

World; July/August 2001

Week 7 – November 5th

Business and Diversification Strategies for Health Care Organizations

Readings

Startup, Acquisition, or New Programs and Service

A Framework for Choosing the Best Business Expansion Strategies; a Braff Group publication

 Strategic Déjà Vu - Strategic initiatives that appear to be good often go bad;

a Braff Group publication

Evaluating Diversification Strategies – Diversification is not for everyone;

a Braff Group publication

Strategic Planning for Business Value – Planning a strategy to grow your business for maximum valuation means reducing risk through strong financials, a seasoned management team, diverse referral base, optimal business mix, and a strong brand identity; a Braff Group publication

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NYUWagner – The Business of Health Care – HPAM-GP.2848-001

Fall 2012

Week 8 – November 12th

Mergers and Acquisitions in the Not-for-Profit Sector

Readings

Bringing Mergers and Acquisitions to the Nonprofit Mainstream; Alex Cortez,

William Foster, Kate Smith Milway; Philanthropy Magazine; Spring 2009

Nonprofit M&A: More Than a Tool for Tough Times; Alex Cortez, William

Foster, Kate Smith Milway; The Bridgespan Group, Inc.; 2009

Consolidation Strategies for Non-Profit and For-Profit Companies;

a Braff Group presentation

The Role of Mergers and Acquisitions in the Not-For-Profit Healthcare Sector –

Parts I and II; Joel Wittman; NYU Wagner Health Policy Blog; May and June

2012 issues

Week 9 – November 19th

Factors Influencing Mergers and Acquisitions in the Health Care Industry –

Economic and Otherwise

Readings

Mergers/Acquisitions – Still the Right Strategy?; Joel Wittman

Essentials of Health Care Finance, 6 th

Edition; William O. Cleverley and Andrew

E. Cameron; Consolidations and Mergers – Chapter 19; Jones and Bartlett,

Publishers

The Credit Crunch, Private Equity, and Home Care; a Braff Group publication

Private Equity Investment in Home Health Care: Is the Window of Opportunity

Beginning to Close?; a Braff Group publication

Private Equity Groups Take an Interest in Home Health;

a Braff Group publication

Why the Home Health Public Markets Stumbled ; a Braff Group Publication

Why You May Have a Rooting Interest in Publicly Traded Competitors;

a Braff Group publication

Second written assignment due.

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NYUWagner – The Business of Health Care – HPAM-GP.2848-001

Fall 2012

Week 10 – November 26th

Valuation of Health Care Companies and Steps to Maximize Value

Readings

What Is My Company Worth?; Joel Wittman

Mergers and Acquisitions: The Multiple Problems with Multiples;

a Braff Group publication

Business Valuation - Demystifying Risk and the Earnings Multiple for Both

Buyers and Sellers; a Braff Group publication

From Theory to Practice - Common Errors and Misconceptions in Business

Valuation; a Braff Group publication

Value Is Not Absolute - Selling a business for more than fair market value involved knowing your true value to the buyer; a Braff Group publication

Selling Your Business - 10 Critical Strategies to Maximize Value in a Divestiture; a Braff Group publication

Ten Ways To Increase M&A Value; a Braff Group publication

Various handouts

Outline of company to be analyzed due.

Week 11 – December 3rd

The Mergers and Acquisition Process

Readings

Various handouts

How to Sell Your Company: The Cliff Notes Version; a Braff Group publication

Week 12 – December 10th

Buyer Intelligence and Negotiation

Readings

Corporations Don’t Buy Companies – People Do: A Glimpse Inside the Brain of the Buyer; a Braff Group presentation

The Art of Negotiation; a Braff Group publication

 Let’s Make a Deal; a Braff Group publication

Negotiation Techniques; Gerard I. Nierenberg; The Complete Negotiator; Chapter

10; Nierenberg and Ziff Publishers

Common Errors in Negotiation; James F. Hennig, Ph.D.; M&A Today

Negotiating with Difficult People or Situations; James F. Hennig, Ph.D.; M&A

Today

 Negotiate Like a Teamster and Leave ‘em With a Smile; a Braff Group presentation

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NYUWagner – The Business of Health Care – HPAM-GP.2848-001

Fall 2012

Week 13 – December 12 th – Classes meet on Wednesday

Timing the sale of a business

What occurs after a transaction?

Readings:

Is it Time for You to Sell?; a Braff Group publication

After the Acquisition: Recognizing and Minimizing the Impact of Ownership

Changes and Personnel; a Braff Group publication

Week 14 – December 17 th

Presentations of Confidential Information Memoranda (CIM)

Third written assignment/CIMs due; group presentations

Joel Wittman 9

NYUWagner – The Business of Health Care – HPAM-GP.2848-001

Fall 2012

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